Shanghai Industrial Holdings' (HKG:363) Upcoming Dividend Will Be Larger Than Last Year's

Shanghai Industrial Holdings Limited's (HKG:363) dividend will be increasing from last year's payment of the same period to HK$0.52 on 14th of June. This makes the dividend yield 8.9%, which is above the industry average.

Check out our latest analysis for Shanghai Industrial Holdings

Shanghai Industrial Holdings' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Shanghai Industrial Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 6.7%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was HK$1.08, compared to the most recent full-year payment of HK$0.94. This works out to be a decline of approximately 1.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Shanghai Industrial Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Shanghai Industrial Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, Shanghai Industrial Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Shanghai Industrial Holdings you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.